Why you won’t hear me using the word bankster

In the months since I began this website, I have had some fairly harsh things to say about economic policy in the U.S., the U.K. and elsewhere. I have consistently condemned what I think is a captured government promoting an unstable financial system and a bloated financial sector. But, I have made a conscious effort to not use the word ‘bankster’ because I find it unfair and dehumanizing. Other bloggers may disagree, but allow me to tell you why I have made the choice I have.

Wall Street, indeed the financial services industry globally, employees hundreds of thousands of people. These people do not magically transform into ‘banksters’ looking to steal grandma’s pension when they start working on the Street or the City. They are no different than you or I.

The problem is government. Our policy makers are the ones who allowed easy money and lax regulation to become the status quo. They are also the ones who gain power through the political patronage of special interests as we have seen not only in banking, but in healthcare and oil and gas. Government has created a lawless environment in which far too many individuals have committed fraud and far too few have been prosecuted. But the vast majority of people in the financial services industry are hard-working honest individuals who do not deserve to be labeled banksters.

Take the recent Washington Mutual expose that I linked to in an earlier post. There was a telling few lines involving a veteran WaMu employee that goes to the heart of the problem. It says regarding a predatory loan product at WaMu:

The White House is pushing for a new consumer regulatory agency to end these sorts of abuses, but the banking lobby and even federal banking regulators are opposed. Banks say more regulation would kill innovation.

"I hated that loan," said Mary Kay Morse, a 20-year veteran at WaMu whose job was to persuade independent brokers to make option ARM loans. "It’s just not a good loan. It wasn’t good for the borrower."

That loan affected her opinion of WaMu.

"I always felt like I worked for a really honest industry that cared for the borrowers they dealt with," she said. The corporate culture changed to: "We just want to do the most we can to make money for the bank."

How could she have changed anything when the whole force of the system was working against her instincts? Should she have quit her job, left the industry, or blown the whistle? And to the degree she participated in getting these option ARMs out to consumers, is she complicit in the whole web of deceit?

To me, these are important questions which go to the concept of “collective guilt,” where people go along to get along while crimes are being committed in their midst. What got me to thinking about this issue was a BBC Documentary podcast called “Assignment – Protecting Britain’s Children” which I listened to this morning. The issue was social services in Britain and their complicity in the horrible death of an infant called Baby P at the hands of his parents in Britain. The incident caused shock and outrage, much of which was directed at Britain’s social workers, who were seen as complicit in the death.

Some social workers felt ashamed of who they were. Others left the field. Many more felt besieged by the public as a whole. I listened to all of this thinking of the parallels to the banking industry, which was crystallized for me when I read the Washington Mutual article. I see both episodes as related to some sort of collective guilt.

I have a problem with assigning this collective guilt to so-called ‘banksters.’ Yes, we should want regulators to do their jobs and prosecute people for fraud. We have not seen any prosecutions I know about from the alleged predatory lending at Washington Mutual or Countrywide Financial. This is yet another example of the permissive and destructive regulatory environment which created this mess.

But, we should stop well short of making blanket accusations of blame. The notion that there is collective guilt here is something we need to examine and address. I, for one, do not support it. I see captured and weak government as the problem.

Blame the government for setting up a rigged and corrupt system without adequate checks and balances. Vilify regulators for encouraging fraudulent practices that ripped off and bankrupted ordinary Americans and led to a fantastic crisis. Reserve your enmity for a system which encourages greed and naked self-interest at the expense of the broader economy and financial stability. And demand action.

Edward Harrison is the founder of Credit Writedowns and a former career diplomat, investment banker and technology executive with over twenty five years of business experience. He has also been a regular economic and financial commentator in print and on television for the past decade. He speaks six languages and reads another five, skills he uses to provide a more global perspective. Edward holds an MBA in Finance from Columbia University and a BA in Economics from Dartmouth College.

Banksters (n): an imprecise but entirely appropriate term used to refer to those who had a significant hand in the foundations and evolution of the late-20th/early-21st century global financial crisis.

Overused when referring to every employee of any bank, it is nonetheless a useful shorthand for the collection of dirty hands that are AIGFP senior managers, CDO^2 salesmen, complicit financial executives, corrupt NRSROs, mark-to-fantasy CFOs, head-in-the-sand Directors, clueless-and-captured financial regulators, beholden-and-bought politicians, and anyone who deals with credit other than the person who is using the term.

While I understand your point, saying “Don’t hate the player, hate the game” is a bit like exonerating Al Capone because he was just part of a corrupt system.

If you are gaming returns on your hedge fund through organized and deliberate insider trading and / or laundering drug money then you are a major part of the corruption and rot, not just a hapless bystander who got swept away in it all.

Now, it’s not like that. I am saying specifically push authorities to punish fraudsters and criminals (what’s not happening) but don’t make a blanket judgment (what is happening).

LavrentiBeria says 9 years ago

“I look more to government and its regulators as the problem than the banks.”

And this the reason you restrain your tone when it comes to the banks? Its an either/or proposition for you? Only the banks OR the government and its regulators can be considered miscreant in this respect? Can’t both be miscreant, thereby allowing you the emotional room to feel comfortable tearing into banks and government together? I mean, clearly, conniving bankers and for sale politicians are at the heart of this mess. Are we to exempt one from moral responsibility when they share it? Come on, Ed. You can do it. Call ’em banksters in the one case and whores on the other. That’s what they are, of course.

jolt says 9 years ago

“Don’t hate the player, hate the game.”

I hate both. Yes, no doubt it is the responsibility of the politicians to create and implement proper laws, and it is the role of regulators to enforce those laws. In my view, most of the necessary laws have been in place all the time, they just haven’t been enforced. However, there also comes a point were personal responsibility and, yes, morality comes into play. Just as was reported last week (cannot remember where I read it) about Freddie employees being paid various “bonuses”, basically buying their silence for the myriad of pending civil cases. At what point should someone who is offered such things say “just say no”?

Is it all the “banksters” fault? No, but I certainly won’t stop going after them as well as those who, although they may not have perpetrated crimes themselves, lived off the system.

The politicians will be taken care of as well, that is why there are elections. Unfortunately it is not possible to vote out morally-corrupt bankers and other business people.

Winston99 says 9 years ago

So you also blame the cops for not knowing what bank John Dillinger was going to hit next?

I worked in government for a while and my parents were life-long government employees with more than 50 years of service between them. Yes, regulators are people like you and me, as all government employees are.

So, you won’t see me calling government officials ‘bureaucrats’ either.

How about those death camp guards in Nazi Germany? They we re doing far more despicable things to fellow human beings, than what today’s banksters have done.Are we going to exonerate them, because they were either enabled or ordered to do so by the Nazi regime? No! They will be forever war criminals.
Four years ago when I was shopping around for mortgage every single person I spoke with, pushed interest only or ARM mortgage product. I am sure that every one of them was aware of what they were trying to sell me, but didn’t care a bit. What they wanted was to collect the commission and the fees.